Law Practice Management

By Debra Cassens Weiss

Jun 20, 2013, 10:45 am CDT

A survey of malpractice insurers shows why lateral hiring may have unintended consequences.

Five out of seven major insurers that responded to the survey said they experienced an increase in malpractice claims as a result of mergers and lateral hires by law firms, the Wall Street Journal Law Blog (sub. req.) reports. The seven insurers represent about 80 percent of the nation’s 250 largest law firms.

The practice area most often targeted is real estate, according to the survey by insurance brokerage Ames & Gough. Five of the seven insurers reported malpractice claims rose in 2012, and six of the seven reported a significant increase in claims above $50 million.

Mergers and lateral hires can create conflicts of interest and the potential for malpractice claims, according to the report by Ames & Gough. “All five insurers experiencing claim increases cited new, lateral-hired attorneys—who continue to work on clients of their former firms while employed at their new firm—as creating potential claim issues,” the report concluded. “Two insurers also indicated that new attorneys were not trained or supervised properly, and one insurer also traced issues to law firms not resolving potential conflicts of interest.”